Help Wanted: A New Economic System

Christina Farr in her latest post ‘Employers, Payers, and Pharma Face a Post–Labor Day Reckoning’:

"We are living in unprecedented times.

One of the LinkedIn posts that struck me most this week was shared via Chris Ellis, CEO of Thatch, a [software] company in the ICHRA space, which described three “tectonic shifts” in the healthcare industry that are occurring all at once.

Ellis kicked off the piece by describing how he had taken a call with an executive from a large health plan who described this period as “the most destabilizing he’d seen in his career.” The post is worth reading in full, as it describes the impacts of inflation, massive pullbacks in government spending, and challenges that small business owners face across the country.

All of that mirrors much of the talk from a webinar I moderated this week, hosted by Personify Health, where we convened a group of experts to discuss rising costs of care and how employers are mitigating that. What stood out in the conversation is that larger employers are still committed to providing healthcare, even amid CFO pressure to cut costs, and that there’s sustained interest in benefits that employees most favor (fertility benefits, obesity management, and more).

One of the biggest challenges, however, is motivating employees to engage in preventive care -- whether it be lifestyle modifications, vaccinations, screenings, and more...."

What stands out is the complete absence of 'narrative surprise' and the perpetual short-circuit in thinking about the nature of innovation, competition and computational imagination to lead the next cycle of business strategy in the largest and most lucrative market on Earth. (For more Blue Spoon thinking around these themes, see Trump is Full of Narrative Surprise, and You Should Be Too).

Healthcare suffers from origin damage going back generations.

It’s beyond any reasonable rage and almost beyond repair, at least in conventional strategic terms, with The Standard Talk shaping meeting agendas and PowerPoint bullets today, the 'horseless carriage concepts' around which a $4 trillion economic system rotates and recycles itself. (Cars were originally known as “horseless carriages”— defined, like driverless cars today, by the removal of a characteristic. But having done away with horses, cars proved to be entirely different beasts, facilitating suburbanization and becoming symbols of self-definition, an entirely new industry ecosystem).

In 2007 describing Pfizer's urgent need for reinvention and the "tough road ahead", then CEO Hank McKinnell spoke at the Reuters Health Summit about his strategy for growth amid big tectonic shifts:

"I've been in this business for 35 years. I've been in postwar Japan, pre-revolutionary Iraq, worked in China during the Cultural Revolution, and I've never seen a period of such uncertainty."

Not much has changed since then.

For that matter, not much thematically has changed in healthcare since at least the late 1960s, another period of Fear and Loathing in the United States, when rising and unabated “cost” officially became a “massive crisis” requiring “urgent” attention, all announced at press conferences and “patient conferences” organized by the administrations of Lyndon B. Johnson and Richard M Nixon. (See After 50 years of ‘health crisis,’ chuck the Chicken Little rhetoric in STAT).

The American Way of Healthcare suffers from an epidemic of arrested market development, and untapped GDP-shaping potential, because it keeps making the wrong diagnosis. Hence the theory of repair is wrong. We are either asking the wrong questions, or our questions are based on the wrong framework.

The nut of the problem -- and the spark to a Big Strategic Rotation - is better framed through the lens of power, leverage and control. How do you displace it, how do you invent it.

To wit last week, via Express Scripts messaging at an investment conference. Reporting by Fierce Healthcare (Cigna exec says Express Scripts poised to weather eventual PBM reform):

Reforms to the pharmacy benefit management industry continue to be a key topic of interest on Capitol Hill, and the top brass at Cigna expect to weather eventual policy changes.

Chief Operating Officer Brian Evanko spoke at the Morgan Stanley Global Healthcare Conference Wednesday morning. The Cigna Group operates Express Scripts, one of the three largest PBMs.

Evanko said there is room for the industry to evolve, but the company ultimately believes its business model will be "durable" as clients sign on with Express Scripts for its focus on affordability, clinical programs that promote safety and benefits administration services.

“We don't try to protect the status quo as it relates to our business," he said. "We’re engaging constructively with lawmakers in D.C. and the states. We believe it will be manageable for us ultimately as long as those three value creation levers aren’t compromised."

I don’t see how Cigna’s “value creation levers” serve the Greater Good.

The next cycle of big economic innovation in healthcare will have very little to do with technical logic because strategic problems don’t have technical solutions. More to the $3 trillion-dollar-point, all the artificial intelligence in the world applied to “shorten drug discovery from years to months”, as Nobel Prize-winning DeepMind CEO Demis Hassabis said in an interview with Bloomberg Television last week, will still produce the same sort of technical input (i.e., drug) whose “value” is defined with obsolete economic concepts.

The only difference now is that ‘drug development’ is just more efficient.

Markets aren’t about “efficiency” — they’re about power and control. And market innovation is the deliberate process of finding and positioning power, of inventing leverage in an organized and persistent way. The end state is/are a portfolio of new economic systems (“ecosystems”) that become a control point, a way to displace an embedded economic network. (For more Blue Spoon insight on this, see How to Make Express Scripts Irrelevant in One Slide)

‘Pharma’s Magic Quadrant’

The world is standing at a hinge moment.

But navigating the transition space to a new era starts by breaking free from ‘strategic atrophy’, the loop of old concepts that keeps so much pharma investment from sparking fresh growth.

There’s a big difference from “using technology” to creating an economy with technology. The latter framework starts with a different origin story, one that enables companies to construct new narratives, market structures, and value models that move beyond transformation into true market-shaping strategy. Sanofi’s CEO a few days ago in an interview published in the CEO Signal:

Paul Hudson has a blunt view of peers who hand off the execution of their artificial intelligence strategy to their chief digital officer.

“Idiots,” Sanofi’s chief executive scoffs.

He hastens to add that he has a great CDO, but says people in such roles get bogged down by the technical aspects when told to lead a company’s AI strategy. “Five years go by, nothing happens,” he says. The lesson for CEOs? “You don’t delegate the revolution.”

Indeed.

/ jgs

John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry narratives.